Arkema S/Adr

Welcome to Arkema's first quarter 2025 results and outlook conference call. For your information, this call is being recorded. It will take place in a listen-only mode, and you will have the opportunity to ask questions after the presentation by pressing star N1 on your touchtone telephone. I will now hand you over to Thierry Le Henaf. Chairman and Chief Executive Officer. Sir, please go ahead.

Hello, thank you very much. Good morning, everybody. So, welcome to ARCHEMAS Q1 2025 Results Conference Call. Joining me today are Marie-Josée Toncion, our CFO, and the Investor Relations Team. As always, to support this conference call, we have posted a set of slides which are available on our website. I will comment now the highlights of the quarter before letting Marie-Josée go through the financials, and at the end of the presentation, we'll be available to answer your questions as usual. After a challenging macro in 2024 during which Arkema delivered a good performance, the market environment in Q1 2025 remained difficult with volatility and also a lack of visibility, reinforced as you well know, by the ongoing uncertainty around trade tariffs that has driven certain customers, particularly in the U.S., to adopt a wait-and-see attitude. As a result, the demand went globally through across most of our markets in Europe and the U.S. in the first quarter, while Asia remains solid with significant growth. Note that there were some exceptions in the market, with well-oriented markets like electronics, which again supported PM's significant development. In this context, Arkema results end up well with EBITDA slightly down at 329 million euros for the quarter. Our specialty materials, which represent 93% of our total sales and which are the core of Arkema's strategy, showed a good resilience with EBITDA close to last year level with a 3% decline, supported by the strong growth of high-performance polymers following on from the positive momentum of last year. On the opposite side, intermediates, which is 7% of our sales, decreased significantly due to refreshing gases that are expected to stay weak in the second quarter before they start to improve. Looking briefly at the performance of our three specialty material segments. In the adhesive segment, our ongoing work on efficiency, our strict control of operation, as well as our continuous dynamic price management enabled us to mitigate the weak demand environment in industrial adhesives in Europe and North America while the construction business was rather stable. Besides, Bostik benefited from the integration of dose-eliminating adhesive, which is starting well, I'm pleased to say. In advanced materials, our EPIDAR was strongly up by 7% thanks to the good momentum in high-performance polymers, especially in Asia. The dynamic of new business developments, notably in batteries, electronic and sports, drove the significant volume growth and was supported by the plant expansions. Moreover, I wanted to highlight Piam, whose EBITDA increased by more than 70% in Q1, supported notably by the rising demand for ultra-thin PEI films for smartphones, one of their latest innovations. Lastly, in coating solutions, market conditions remain at a low level in extreme acrylics, impacting the performance of the signals. I believe this Q1 reserve positions us well among the industry and concerns the resilience of our portfolio of high value-added technologies and specialty materials that we have built over the past years. The group continues to implement with a high level of execution its major project, which will support the growth of the company in the future. As mentioned already, we have made good progress in integrating the teams of DAO and already put in place a whole set of initiatives to restore their market position and improve the performance of this activity with procurement and cost optimization. This is really an exciting project where Arkema can make a difference since our additive businesses are very complementary. We can now propose a full set of technology for flexible packaging to our customers, and this should position us as a key player in the market. We are happy to confirm our expectation of significant development and synergies over the next five years. On the organic project front, we are progressing well with the wrap-up of the 1233ZD unit in the U.S. This new generation of fuel specialties with low emissive impact used for energy efficiency of buildings is already contributing nicely to our results. In addition, our DMDS capacity in the U.S. should wrap up from mid-year as well as the expansion of our organic peroxide in China. Besides, I'm very happy to confirm that our Greenfield polyimide 11 plant in Singapore is now running pretty well from a technical standpoint and should start to exceed break-even around the summer. Finally, as already announced in Feb, we'll shortly start to work on our new capacity in the U.S. for PVDL, scheduled to be completed mid-2026. This represents a high-return project with a limited investment of 20 million US dollars, which will enable us to follow market development and answer the increasing demand for locally manufactured PVDF, notably in semiconductor, cable markets, and energy storage systems. I also wanted to come back quickly on the long-term agreements we recently signed with ENGIE for the supply of biomethane for Bostik in France. This means that approximately 85% of the gas consumption needed to run our Bostik operation in France will come from a renewable source. This follows the agreement we already signed last year, also with ENGIE, for advanced materials, and both will contribute to reduce our CO2 scope, one, emission in line with our climate plan objective. I will now hand it over to Marie-José for a more in-depth look at the financials before we discuss the review at the end of the presentation, and we exchange around your questions.

Thank you, Thierry, and good morning, everyone. So let's start with Arkema's revenues. At 2.4 billion euros, the Q1 sales were up 1.7% year-on-year, supported by a 1.9% positive scope effect, corresponding mainly to the 51 million euro sales contribution of those illuminating adhesives. Volumes came out broadly stable year-on-year, supported by Asia, and driven by the continued progression of high-performance polymers in advanced materials. This performance was achieved in the context of an overall weak demand environment in many markets in Europe and North America. The price effect was limited to minus 0.5%, reflecting the globally stable raw materials environment. Q1 EBITDA came in at €329 million, 6% below last year. Main items are the intermediate EBITDA, which was down nearly 40% year-on-year at €24 million, essentially impacted by the significant decrease in refrigerant gases due to the implementation of new quotas in Europe, as well as lower prices in the US. Acrylics in China allowed to offset partly this effect, thanks to good momentum and volume at the start of the year. On the other hand, specialty materials were very resilient, with an EBITDA at 331 million euros, 3% below Q1 last year. When looking at the different segments, Adhesive solutions achieved EBITDA of close to €100 million. It was impacted by the lower volumes mainly in industrial adhesives, while construction remained at a low level but was supported by our dynamic pricing management and strict control of operations. The EBITDA margin reached 13.8%, which takes into account nearly 50 basis points of dilutive effects related to the consolidation of dowels laminating adhesives. Advanced materials EBITDA increased significantly at 174 million euros thanks to a solid growth in high-performance polymers, benefiting from the growing contribution of PI, advanced materials, the positive momentum in fluoro specialties, and the progressive contribution of new projects. Performance additives held up well in a weak environment, and all in all, advanced materials EBITDA margin improved 100 basis points to 19.5%. EBITDA and coating solutions came in at 58 million euros, reflecting low cycle conditions in the upstream, as well as lower volumes in the downstream activities. Depreciation and amortization stood at 169 million euros and included the amortization of the new production units, which started up during 2024, leading to a recurring EBIT of 160 million euros and a EBIT margin of 6.7%. Non-recurring items amounted to 58 million euros, including 36 million euros of PPA amortization, and 22 million of one-off charges, notably the reorganization costs at our journey site in France, and some restructuring and integration costs at Borsig. Financial expenses stood at minus 24 million euros, reflecting the lower interest on invested cash. Tax expenses at 22.5% of rebate are consistent with the last year's level. And consequently, the Q1 adjusted net income stood at 99 million euros, which corresponds to 1.31 euros per share. Moving on to cash flow, Q1 recurring cash flow amounted to minus 138 million euros, which included the first quarter working capital seasonality, The working capital ratio on annualized sales stands at 17.4%, slightly up year-on-year, including a negative change in fixed assets payables. This is clearly mechanically linked to the reduction in capex in the first quarter this year compared to the end of last year, which was at a peak level in a capex commitment. Local capital expenditure amounted to 89 million euros in the quarter. In line with our guidance, our annual cap extends around 650 million euros for the full year 2025. Net debt on hybrid bonds at the end of March 25, therefore amounted to just over 3.4 billion euros. The net debt to last 12 months EBITDA ratio stands at around 2.3 times. This concludes my comments. Thank you for your attention. I will now hand it over to Kerry for the outlook.

Thank you, Marie-José, for your comments. So going into Q2, as you well know, the weakness and the uncertainty in the macroeconomic environment that we observed in Q1 was reinforced at the beginning of the second quarter by the announcement of significant tariffs by the U.S. administration and by the way and attitude we could observe from customers. With regard to this topic of tariff, We have developed over the years a particularly strong industrial footprint, as you know, in the three major regions of the world in order to serve customers from their own geography. This proves to be a key element to protect the group from direct impacts of higher tariffs, which we assume should be therefore limited. Nevertheless, we are remaining obviously very attentive about the indirect impact of these and the reply from other countries on the global demand and the macroeconomics. This is obviously not easy to quantify at this stage. On the other hand, we certainly continue to focus on our self-help, controlling strictly our costs and operations, as well as pursuing our main goals, project execution and ramp-ups. In this context, assuming no major slowdown in global growth occurring from the current Paris implementation, the Group will aim to achieve, in 2025, an EBITDA at least equal to last year at constant exchange rates and a recurring cash flow of close to 600 million euros, which would mean a significant step up compared to last year. I thank you very much for your attention, and together with Marie-José, we are now ready to answer your questions.

Thank you. If you wish to ask a question over the phone, please press star 1 on your telephone keypad. If you wish to withdraw your question, please press star 2. Again, please press star 1 on your telephone to enter the question queue and wait for your name to be announced. First question is from Tom Brutlesworth, Morgan Stanley. Please go ahead.

Good morning, Thierry, Marie-José. Two questions, if I may. The first one is on PM. I mean, clearly you bought this as a business that would grow, but I don't think I've fully understood the point you're making today. Are we now in a phase where PM's delivering its next phase of growth? You talk about 70% year-on-year growth in one queue, but clearly there's a strong step-up expected in the PM consensus through the rest of this year. So are we now at a point where we're going to start to see growth consistent growth from PM going forwards. Second question, if I may, again, just around your 2Q guidance. So 1Q was down approximately 7% year over year, but is it fair to assume that the exit rate from 1Q is worse, is down more than 7%, and therefore the starting rate for 2Q is going to be below that, on top of which we then have to think about the FX impacts I'm just trying to grapple with whether you're seeing a further deterioration in the data in April versus what we saw in March with regards to this wait-and-see from U.S. customers. Thank you.

Thank you for your question. So, yes, with regard to PM, our feeling is that But it was already the case, if you remember, last year, particularly in the second part of last year, we are growing, which is nice to see in the current world, because the pockets of growth are quite limited in the current macroeconomics. And we believe that PIAM will continue to grow, especially in electronics. with also some other developments in other industrial markets, will continue to grow in the coming quarter. So as you know, the equity story for PIAM was not just sort of short-term growth, but also a long-term project where we could We believe we could change significantly the base of profitability of PM over five years, and it's nice to see that last year we started to see that. At the start of the year, we confirmed that, and hopefully it will continue. Also, I will not promise that the kind of growth that you show in the first quarter will be the same for the following quarter, but we should continue to grow in the coming quarters and years. With regard to Q2 guidance, I would say it's not purely a guidance. It was more to give you some color on Q2 in a world which is rather to say the least. What can I say? So we say that we talk about relative continuity, so which means that broadly similar trends to the ones in Q1. Still contrasted trend by region. This means no demand in NA and Europe, and Asia still continuing to do well. Most of the markets showing weak demand, but with exceptions like electronics that we mentioned with PR, but also batteries, sport, 3D. Certainly significantly better resilience of specialty materials versus intermediate. So these elements that we saw in Q1, We believe we will see them in Q2. The two difference will put a bit more pressure on Q2 than on Q1 that we spotted. One is mechanical, the FX evolution. Whatever we do, we've got an in a pole. It was not favorable. We'll see what it is in May and June, but, you know, it's quite volatile, and so the truth of one month can change the month after. But let's say that if it continues like it was in April, it's a negative factor compared to Q1. And then, and again, it's uncertain. We have no crystal ball, and we need to see what is the landing point. We had early April the confirmation of the U.S. tariff, as you know, and also the magnitude, which in April reinforced the wait-and-see attitude of customers. So this is also the second difference between Q1 and Q2. But for the rest, this is what we say. We see a good continuity.

Okay. Thank you very much. You're welcome.

Next question is from Martin Roger. Capital Shibboleth, please go ahead.

Thank you. Hello, good morning, Thierry and Marie-José. First question, did you see any pre-buying from your customers in Q1 in advance of the tariffs? The reason I'm asking is that the volumes in intermediates were up by 16% in Q1, and that was driven primarily by acrylics China, which must have been skyrocketing in demand. And the second question, bit of coming back to Thomas question before regarding your guidance for 2025 every day was down by six percent into one you say the trend continues into Q2 which means every day will be down into two as well year-over-year but your food your guidance is slatish every day that means you need to catch up in the second half to reach your guidance but the second half is usually a seasonally weaker than the first half. So what makes you confident that this seasonality in the second half this year will be more favorable than in the past?

Okay.

So on the pre-buy, because in the market, which is chemical, which is serving so many customers, so many countries, so many markets, is already difficult to have a complete feeling of maybe there has been a little bit of pre-buy in Asia, it's possible. But if you look at Asia, this good trend, we already had it in last year's second semester, so it was not a question of tariff at that time, and the trend was good. So we see, and I think we share it with you, we see a good momentum in Asia since now, a certain number of quarters, maybe because of our positioning in this region. So we'll see. But on the other side, you talk about pre-buy, but we saw also destock, and we'll come back to that on your second point, in Europe and the U.S. So it's always a mystery how customers can continue to destock. But it's true that we believe that the stock in the chain are rather low. So now when you look at the full year guidance, yes, clearly it shows some rebound in H2 of the macro after an H1, which is really atypical from what we have seen. This kind of demand, cautiousness, wait and see is quite atypical. So then all of you have different assumptions, and we have our own assumptions that we wanted to share with you, and we share also internally to get all our teams focused on what we want to deliver. This is obviously what we shared with you. What we think is that, so when you say seasonality, in fact, we compare year and year. So this means we compare H1 with H1 and H2 with H2. And we think that we have the stocks in the chain, clearly, as I mentioned. Is the demand in the Q1 and Q2 is weak? We don't see a collapse. In fact, if you look at our volumes, they are negative but not so negative. So this means we have not collapsed in the end market, which means that we believe, and then we can have a debate on that, that clarification and stabilization of geopolitical topics should support an improvement with some level of rebound. And then, last but not least, on top of that, we have the contribution of the project with that policy ramp-up. So even if we assume the lower end of the range to be consistent with our full-year EBITDA guidance, you still deliver 80 million EBITDA on the year, and the majority of it will be in the second part of the year. So these are some elements that we can share with you.

Thank you.

Next question is from Aaron Ceccarelli Berenberg. Please go ahead.

Hello, good morning. Thanks for taking my question. I have just one on high-performance polymers. Last week, one competitor of yours reported mid-single-digit price decline. I wanted to understand what's driving your positive pricing in high-performance polymers. if you can be specific in terms of which polymers and application that would be useful. Thank you.

So we don't specifically disclose HPP. We disclose advanced materials. You have a combination. What is clear is that high-performance polymers were mostly driven by good volume and new business development introduction pricing I would say was rather neutral and it's true that we work a lot on the mixer with some introduction of New business in fuel specialties, as you know. I mentioned, I think, in my speech, 1233 ZD, which is doing well. Clearly, it takes a mix-up, so good mix. Our development in the especially polyamide supported by our Singapore plant, but not only is going in the right direction, also we really focus on new business with a high value. PM has a good pricing by nature. You know that PM, you saw the business case on PM. They have a strong profitability, also it certainly has. So it's a combination, I would say, but it's more, it's not really the pricing, it's really the impact of the mix. and which was favorable and, as a result, a good volume development. But we were, I would say, more, let's say, neutral plus in terms of pricing. But the team are really doing a good job now. Thank you.

Next question is from Alex Stewart, Barclays. Please go ahead.

Hello. Thank you for the discussion. A couple of quick questions. Did I hear you say that you're still expecting 80 million or so of contribution from the big project starting up this year, and that you expect that to be more heavily weighted to the second half? I just wanted to clarify that point. In adhesive technologies, you had quite a material slowdown in Q1, as you've highlighted. Could you tell us when in the quarter that started? Was it really towards the end of March? Was it February, March? Just some idea of when that started to change would be very helpful. And then finally, in flora gases, talk about weaker pricing, which weighed on margins. Was that as you expected, or was it worse than you expected? And if it was worse than you expected, what are the main reasons why it was worse, given that you had... pretty good visibility into quotas and, you know, this isn't a business that moves around a huge amount quarter to quarter on volumes. So any insight on those three points would be great. Thank you.

Okay.

Yes, you understood right on the 18 million contribution from a project, but my message was we would be more on the one of the range. We gave you, I think, a range of 80 to 130. We say it should be closer to 80 million, but not surprised consistent with the overall number. And I would say we started, to share with you, we started the first quarter. So all the projects are ramping up. Some projects have not even started. Some, like now, are just at the start, et cetera. So you can expect that the quarter-by-quarter development will be higher and higher. And we started at 15, around 15 in Q1. So if you put some improvement in Q2, let's say, 20 to say something, then this means that the second semester will be significantly higher than the first one. With regard to adhesive, thank you for asking the question because, you know, I have quite experience in the adhesive field, and it's very rare. that we see the adhesives, which normally are certainly our most resilient business, which was not the case in the Q1, should not be the case in the Q2 either, more volatile than the advanced material. So this was atypical, and it's really about we have seen that certain customers So without losing any share at all, because we check customer by customer every month in detail, without losing any share. We have some customers in the U.S., in Europe, but surprisingly enough in the U.S., for which the level of demand was 20%, 30%, 40% lower. than it was last year. So this means that they are destocking quite significantly and in an atypical way. And for this reason, we believe that H2 for adhesive will be significantly better. And it comes also to the question of which was asked at the beginning. With regard to flourogases, yes, we must say we are a bit surprised that at the end, On the Q1, we delivered our guidance, which means that for the total company, which means that more or less we had not too many surprises, but flora gas pricing was a bit lower than expected. It comes from this general environment where the demand is low, and then you have As for intermediate, traditional intermediate businesses, you have a correlation between the volume and the pricing. And this is the reason why we think, and we have some evidence of that, media should start to improve both the volume and the pricing, because the stock at our customers are quite low. Seasonality gives more volume in fluorogases. Q2 and Q3 are a bit bigger, and Q3 is always bigger. It should help prices. And also maybe this is an example where tariff should help. So for this reason, we think that H2 should be quite better with regard to fluorogases. One last point on the adhesives also you asked between... I mean, it's always very difficult, it's my experience, to comment one month because, you know, one month is always, you see, the separation are long. This is not because one month is lower or higher than another, that it means anything. So, it's better to look at the whole quarter.

Next question is from Keaton Udeshi, JP Morgan. Please go ahead.

Yeah, hi, thanks for taking my questions. The first question was simple. Can you remind us what is your current sensitivity on FX, bearing in mind that, you know, euro has strengthened not just against US dollar, but also a few other currencies like perhaps, you know, Chinese yuan or some of the datam currencies. So any... I had a number of 50 million euro in mind, but maybe just wanted to check if that has changed given the portfolioships and some acquisitions. The second question, just following back to the discussion on fluorogases, are you saying you expect year on year to improve in the second half of the year just because the comps become easier, or you actually think the absolute – contribution from from fluorogases actually uh gets better and just related to that i saw you know one of your competitors honeywell announced uh i think it was surcharge or 45 percent etc on certain refrigerant gases hfo type um can you remind us if i'm not mistaken you produce all of your fluorogases in the u.s that you sell in the u.s so for for you it should be a positive, but I'm not sure if this will be in intermediates, or will that be in your advanced materials, because I suppose some of your newer generation refrigerants are actually included in advanced materials. Thank you.

Okay, so on the sensitivity, so first of all, on the ethics, you know, we have all to be with it, because it's generally It's quite volatile, and it changes every month, if not week. But I would say that what we have communicated so far, which is still true, is that for the U.S. dollar and euro parity, the $50 million, as you mentioned, is impacting the big dollar. for plus or minus 10% change, okay? On the other ethics, we have not communicated, but the main, even if there can be a Korean one, there can be R&B, there can be Japanese, et cetera, you know, it can come from many countries. I would say the main driver is the U.S., and this is the one we communicate to you. With regard to flue gas, I mentioned, when I say the situation is improving, we are never sequential. We are always going to whatever our comments are. It can be for flue gas or whatever. listening to all chemical companies, there can be some confusion, but with regard to Arkema, when we say it improves, it's nearly always a year-on-year. So, and in fluorogas, there are typical seasonality, and reporter has its own seasonality. This is why sequential means not a lot. With regard to refrigerant gases, I think like everybody that is not linked to refrigerant gases, we will, when we need, we adapt on the tariff, so we'll do what is necessary. I would say that the speed between intermediates and HPP is quite simple. Intermediate is really refrigerant for refrigeration. While in HPP, and in fact, there is a coincidence in the 2D HFO, by coincidence, in our chemical development, but since many, many years, I've always been outside of refrigerant. So this means that the refrigerant, or at least for most of it, so this means that in HPP, you will find the HFO, the new generation, and the application are more supported by Megatrans. For example, one good example is this 1233ZD that we use in building efficiency, which is there.

Thank you.

Next question is from . Please go ahead.

Yes, good morning. Two questions that may appear a bit technical, The first one is around working capital. I think you've had one of the largest outflows in Q1 that certainly I can remember. And it looks like it's mostly driven by inventories. I was wondering if that's related to, I guess, inventories of finished products or whether that's reflecting a higher level of purchase of raw materials as maybe you are preparing. I understand you didn't see pre-buying from your customers, but I was wondering if you did some pre-buying yourselves on raw materials. That's the first question. And the second one is on PM. I understand there's a lot of growth, but when we look at the net income from minorities, it's about $1 million in Q125, similar to Q123 or before when you didn't have PM. So I'm wondering, why are we not seeing the, I guess, the minorities flow back to the 46% of PM that you don't own? Thank you.

Maybe I will let Laurie Jose on for the two questions.

So regarding working capital, Laurent, basically we have two main effects, I would say. We have clearly a significant outflow on payables of CapEx since the level of CapEx committed last year was at a peak. So compared, obviously, to the decline of CapEx in the first quarter, there is a significant payout I would say it accounts for half the variance if we compare to the outflow of working capital with Q1 2024. The second is, let's say, customers and inventories. You are correct. In inventories, the stocks are slightly increasing. I would say overall no particular phenomenon. We are, in fact, humping up our stocks classically in this period of the year, coming out of low Q4 levels. When I look at the seasonality of the sales in terms of proportion, stock levels are not inconsistent, let's say, compared to last year. We also have increased in receivables with no sinistrality particular or no overuse particularly increasing, but more linked, let's say, to the increase in sales. So, at this point, I have no particular, let's say, one-off item to give you that would indicate, let's say, a change in strategy where we continue in the organization in terms of controlling our stocks and our creditors. Regarding PI, in fact, when you look at the publication of PI and our own contribution, there is definitely in the conversion in euro a significant adverse variance, I would say, on the Korean won over the period. So probably going back to the question on the fluctuation of currencies, where a number of currencies are actually following a similar trend compared to dollars. So no particular, let's say, issue. The only effect is, in fact, the depreciation of the newly invested assets that we had in PI that we inherited and that, let's say, increased over the year last year. So no particular effect. we should see some reduction in their financial expenses. So in terms of net income, I think we should see, let's say, a translation of their improved EBITDA into net income as we progress in the year.

Okay, thank you. Next question is from Emmanuel Matot, Adobe HF. Please go ahead.

Hello, Terry. Hello, Marie-José. I still have three questions. First, I understand the integration of DAO adhesives has started well. Does that mean that the 13.8% of ABDA margin in adhesives in Q1 should be the low point and you should recover as from Q2? Second, do you see much more imports from China to Europe because of the trade war between US and China? Is that a risk you are considering? And last question, how much of your revenue in the US is produced locally and what are the main business units exporting from Europe or Asia to the US? Thank you.

Thank you, Emmanuel. So with regard to DAO, so yes, we confirm that integration, we are just at the first steps of the integration so far from the quality standpoint is going quite well, and we are really implementing our plan. The effect on the margin of DAO adhesive, I think Marie-Josée was what, alpha point? 50 days. Yes, alpha point on BOSTIC. This means the legacy BOSTIC is 14, So, have that in mind. Now, when you mentioned Q2, as we explained in Q2, we have a similar kind of environment, plus GFX, and plus the announcement of the magnitude of the tariff early April. So, you should more expect the improvement of the margin in ADZs on the second semester, as we mentioned, for other business lines. But do we see much more import from China? You know, China, not to be using that in Europe, is a big importer. So now when we say that, it's a general command for the chemical industry, and there are very notable nuances, depending on which business you are talking about. For example, in the disease, we don't see import from China. You will see that more in acrylics. This is why the acrylic margins are more challenging these days. I would not say that we see a disruption or that we expect a risk or disruption of this matter in the coming quarter. I think the landscape is very well known. The European Commission is aware not only for the chemical industry but also for other industries that it is a topic and that they need to address one way or the other in the current world. Now for our company, for Arkema, we are a global player, as you know. Europe as it is, we take China and Asia as they are, and we take the U.S. as they are. There are some strengths, some elements of weaknesses, and it's important to have really a global positioning that we have. Now, with regard to the U.S., as I said, what is not produced locally is rather incremental, so it's not, I will not give you the numbers, but it's not a huge topic for Arkema. We are supplying the region, and we are very close to the customer. We supply the region from the region, if not the country, to the country for the largest country of Arkema. From what we see today, this is a direct impact, and I think I mentioned it precisely. to Arkema of tariff will be limited. The question for us, and this is the one we mentioned when we gave it for the year and for Q2, is more the indirect, what we call the indirect impact, which is the one which is the same for everybody on the global macro and on the global demand. But with regard to local production for...

local sales where our footprint is well adapted. Thank you very much.

Next question is from Geoff Hirer, UBS. Please go ahead.

Yeah, good morning and thank you for the opportunity to ask a question. I just had one left. Looking at the intermediates business for Q2, you obviously delivered somewhere in the region of 84 million last year. Will that number be closer to where you were in Q1, or will it be closer to where you were in Q2 last year? Because it's quite a big difference.

With regard to internet, so we're not a guide for every business or every quarter. What we say is that we had in Q1 quite a... a significant slowdown in our profitability in a year, and that the profile in the Q2 should be in continuity, so you will have, again, a big slowdown in Q2 versus Q2 last year, as we mentioned. I think it was clear in the press release.

Thank you.

Next question is from Tony Jones, Redburn Atlantic. Please go ahead.

Hi. Good morning, everybody. Thanks for taking my questions. I've got two left. On PVDF, two-part question. First, have you changed the growth strategy slightly? So I know also targeting pushing harder into applications like cables and semiconductors in addition to EV. And then secondly, have Could you talk about the sales split for PVDF? Because I'm not really quite aware what that is. And then secondly, on coating solutions, and I know you touched on this a little bit a few minutes ago on the acrylic side, but the EBITDA margin now has been under 10% for a few quarters. We've just not seen that level back since 2015 or so when the acrylic chain was structurally oversupplied. And then we saw capacity taken out. What are you expecting to happen to the acrylics industry in North America and Europe? Thank you.

So with regard to PVDF, no, we have not changed our strategy. What we have said, I think, in the past is that our so-called legacy business, this means that before battery, has been growing in the past by 7% in average. And this growth, so this includes semiconductors, cables, industrial plants, et cetera, the traditional PVDF end market. This will continue to grow not every year. It depends on the year. But in average, I would say, globally, at this kind of pace, let's say 7% a year. On top of that, we got the battery market. which have developed quite nicely in Asia and particularly in China. And if you remember well, we have put in the past, let's say, 10 years, significant capacity in China in order to follow not only this market, but in particular this market. So what we are doing is incremental investment. This is a small investment in the U.S., We are investing, let's say, for it should start in the 26th, for the years 27, 28, okay, in order to be able to follow the growth of the PVDF market in the U.S., uh including the traditional business which will continue to go as they were in the past but it gives also some space to take the first development in battery knowing that nobody knows exactly at which space the gigafactory will be implemented and developed in the u.s so this means that with this kind of investment which is uh strong profitability but modest in size, we are able to be flexible. This means that we can do a bit more of batteries or we can do, if batteries are not there, to push a bit more in a cable semiconductor or other business because they will continue to grow. So I think this is, but we have not changed the strategy fundamentally. The only question that we have had during the Capital Market Day was which size and at which pace we want to increase our capacity in the U.S. for PVDS. And we had different kinds of scenario, something very big, something average, something smaller. And we decided given the evolution of the electric mobility in the U.S., we decided to go for the smaller ones. Split of PVDF, you did not mention if it was by region or market, but anyway, the answer will be the same. We don't give it. So I think it's a level of split we don't want to give to our competitors, so we don't give it. Actually, it's all right to say that we are below 10, but close to 10. So let's say we are around 10, which is really a mid-cycle, sorry, a low-cycle split. a low-cycle environment, which at the same time reflects on intermediate products, the kind of environment we are living in for the time being. But I think the stocks are very low. And again, it doesn't mean that we stay like that the whole year. We think that second semester should be better for acrylics upstream.

Thank you. That's very helpful. You're welcome, please.

Next question is from James Hooper Bernstein. Please go ahead.

Hello, and thank you very much for taking my questions. I have one left. What do you expect the raw material progression to be in the revised guidance? And in particular, how will the oil price affect margins in the kind of upstream acrylics business and coating solutions and other acrylics businesses? Thank you.

Our material, we don't have for the time being, they have been rather stable since the beginning of the year. The oil price has decreased. We'll see is that long-lasting or not. We don't know. If the demand is not rebounding, we'll get certainly upside on the raw material, but we'll get downside on the demand. Okay, so my feeling is that we should have some decrease of raw material, Not so huge on the second semester, at least this is what we planned. And anyway, you have a sort of three to six month lag between the raw material decrease and when it comes to your P&L. But let's say that what we have assumed in our data is maybe here and there a little bit of improvement in raw material, but nothing significant. except maybe given the oil price on some raw material like propylene that will feed acrylic, which is back to your question. But then, as you know, in acrylics, this is not a matter of... Let's say that if you take our most downstream business, if you have lower raw material, you should have some benefit in your P&L. If you take acrylics, it's more driven by the supply demand, so... The propylene price is reflected in the pricing in the axilic. This is the nature of intermediate. So it's not a big factor for axilic, and we have not put what we say is basically the sequencer metal is better axilic. It will come from better demand and from restocking because, as I mentioned, the pipeline of stock is rather weak, but not a matter of material.

Thank you very much. You're welcome.

Next question is from Matthew Yates, Bank of America. Please go ahead.

Just a quick one. Can we touch on the additives part of the materials division? You mentioned that was an area of substance in the portfolio. I think sales down 6%. Can you just expand on where the weakness is and any view on whether or not that's going to improve as the year progresses? Thank you.

So the additives were, I would say, in advanced material, we had two profiles, HPP, which went very well, and ADGs, which were a bit lower than HPP. That last year, I would say combination of the general weakness. I would say, for example, if you take thiochemical, which is more present on some traditional market like refineries. Refinery on the first quarter were for example. So you have some in thiochemical. As you know, we are impacted by the JARI operation in France, which has been quite struggling in the context of the difficulty of our supplier, Vancorex. I would say it's a bit below last year, which is not so bad in the current context. But I would say general weakness with some specific elements like I mentioned in the in link to refinery, link to ag, link to this specific JARI topic. So some of this, not necessarily in the Q2, but in H2, should improve.

Thanks very much.

Next question is a follow-up from Laurent Favre, BNP Paribas Exxon. Please go ahead.

Yes, morning again. A question on the oil and gas side of the business for PVDS and Polyamide 11. We've seen one of your historical customers, I guess, move to a solution with a competing technology with a contract announced this morning in Brazil. I was wondering if you could remind us of how big oil and gas is for your PVDS and Polyamide 11 business and whether that is I think a new serious competition that you are seeing or whether you think it's more of a one-off. Thank you.

So with regard to, and then I take something broader than Q1, let's say last year also, et cetera. No, I would say that the business, I would not give you the numbers on the side for obvious competitive reason. I don't want to share that. But it's one business among others in PolyMI 11 and PVDF, which is a nice business, but by far not the majority at all of what we have in PVDF in PolyMI 11. But it's a good line among the ten houses. And so far it has been a solid business. There are, depending on the application, some new technologies. But also, you have the reverse way. We have benefited from change of technology, which were favorable to us. So, I would say, all you know, it's a business, and it's a business which is never steady. You have some better years than others. But I would say, with regard to Arkema and our development, it goes in the right direction.

Okay, thank you.

Gentlemen, there are no more questions registered at this time.

Okay, so is there no more questions?

I'd like to thank all for your questions, which are, as I said, very interesting. And don't hesitate, if in the day or the days after you have some complementary questions, Beatrice and James and the whole team will be certainly willing to exchange with you. And thank you again for your time, and talk to you soon.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone, and Arkema thanks you for your participation.